Forget 'Ugly Betty' - the best comedy series is - 'Ugly LA Times'!
Chandlers, L.A. moguls float rival bids for Tribune
By James Rainey and Thomas S. Mulligan
Times Staff Writers
9:10 PM PST, January 17, 2007
The contest for control of Tribune Co. of Chicago appears to be coming down to two powerful Southern California interests -- the family that founded that Los Angeles Times and a partnership of billionaires Eli Broad and Ron Burkle.
The two parties each submitted complex offers Wednesday for the media conglomerate that owns The Times and KTLA-TV Channel 5, according to sources familiar with the matter.
The Chandler family proposal would put it in control of Tribune's 11 newspapers, along with a minority partner, while spinning off 23 television stations. The billionaires, in contrast, would leave Tribune intact but would borrow heavily in order to pay a highly unusual dividend to shareholders while giving the magnates a roughly a one-third stake in Tribune Co.
Tribune's board is expected to consider the offers at a meeting in Chicago on Saturday. Tribune declined to comment on the proposals or any other aspects of the auction, which ended at 3 p.m. Wednesday. The deadline was artificial in the sense that other bidders could still emerge.
The Broad-Burkle deal, an unusual recapitalization that a source described as a "public leveraged buyout," would roughly triple the company's long-term debt to more than $10 billion, sharply raising the company's risks and increasing pressure to sell assets or cut expenses.
The most unusual feature of the Broad-Burkle proposal is a gigantic cash dividend of $27 per share -- about $6.5 billion total -- that would be paid to Tribune shareholders soon after the closing of the deal.
For many shareholders, this could be an attractive selling point: receiving $27 in cash yet still retaining stock that Broad and Burkle say would be worth $7 a share after the recapitalization.
Broad and Burkle contend that the stock should grow in value to $12 a share in less than four years. Their plan for achieving this growth is still unknown, although the two said they "would work closely with management."
The $27 is nearly the same price where the stock was trading last summer when the Chandlers went public with their complaints against management, triggering the auction.
They also promised to leave the company's headquarters in Chicago.
The offer will present the Tribune board with a difficult decision, said a Wall Street investment banker who has followed the saga closely.
"They may ask, 'Why do we need Ron Burkle to do this?'" he said.